Bulls came so close last week to an important upside breakout for the Nasdaq 100, states Jon Markman, editor of Strategic Advantage.

The benchmark index tested 12,700 before ending the week at 12,358, down 0.7%. It seemed worse. The declines followed stronger-than-expected data on inflation at the consumer and wholesale levels. Bears asserted that the Federal Reserve will now be forced to keep raising its key bank lending rate, possibly driving the economy into recession.

That’s not the right takeaway, in my view. The Fed moved in January to a disinflation narrative. That stance is likely to be reasserted Wednesday when the minutes from the most recent Federal Open Market Committee meeting are released. The Fed wants to wait to see how the current rate increases are impacting economic growth. This point of view alone diminishes the bears’ key talking point.

Perspective is important. Despite all of the noise last week, bears could not take back key support for the benchmark at 12,240. The index bounced violently Friday from that level to close near the session high. Bulls are on the case, and they are executing their plan in a timely and forceful manner.

Key support is now 12,270, the rising 20-day moving average. I expect bears to cover short positions in the FOMC minutes news release. Important resistance remains at 12,700.

THE QQQ Loop: Members bought the ProShares Ultra QQQ (QLD) on February tenth at $43.67. The 2x leveraged index fund closed Friday at $44.03, up 0.8% from the entry-level.

  • Set up to sell half of the position at $49.30 lmt gtc, and half at $58.20 lmt gtc.
  • Place a stop loss order at $41.10 stp.

If this trade works, the upside targets are +12.7% and +33%. The downside risk is -6.1%.

Learn more about Jon Markman here...